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Rogers: “Volume Is Not Going To Come Back. We’ve Had A Great 30 Years. That’s Finished!”
Jim Rogers is hedging his gold (and silver) positions reflecting that this is normal, following such a tremendous run, and that this is good for the precious metal in the long-run. In his discussion with Maria Bartiromo this afternoon, he notes India’s anti-gold ‘protectionism’ (and its potential balance of payments issues) that are trying to force the hoarding into risky ‘productive’ assets (as others might say). The immutable commodity maven suggests JPMorgan (and its peers) could be behind the drops in the overall commodity complex as the uncertainty of their positions (and liquidation potential to raise cash as bank examiners begin their forensics) becomes more important. He holds the USD, which he hates; has a number of equity shorts; and is most fearful of banks – specifically admitting he is a serial seller of calls on JPMorgan. His advice, and perhaps Maria should look into it given their ratings recently, is to become a farmer; own farmland; and speculate on agriculture. On the dismal ‘ethical’ state of our leaders and management, the thoughtful Rogers opines, “You can read world history for decades. There are always people doing things wrong. We have not changed our human nature… Continue reading
IMF: Gold Is Scarce “Safe Asset” And “Growing Shortage of Safe Assets”
IMF: Gold Is Scarce “Safe Asset” And “Growing Shortage of Safe Assets”
Gold’s London AM fix this morning was USD 1,655.50, EUR 1,261.33, and GBP 1,039.04 per ounce. Yesterday’s AM fix was USD 1,654.00, EUR 1,261.63 and GBP 1,040.25 per ounce.
Silver is trading at $31.56/oz, €24.01/oz and £19.78/oz. Platinum is trading at $1,583.75/oz, palladium at $637.50/oz and rhodium at $1,350/oz.
Cross Currency Table – (Bloomberg)
Gold fell $0.90 or 0.05% in New York yesterday and closed at $1,658.10/oz. Gold has been trading sideways in Asian trading and remains in a tight range in Europe this morning near $1,656.07/oz.
Gold remains supported this morning as the ECB signalled that it would intervene in the debt markets on worries about Spain and the risk of contagion in the Eurozone. ECB board member Benoit Coeure said “the European Central Bank still has its bond-buying programme as an option”.
Investors are also still concerned about other peripheral Eurozone economies like Italy and how they might affect the core Eurozone nations. Italy saw its 1 year borrowing costs rise for the first time since November during its sale of short term bills yesterday, ahead of a 3 year bond auction later today.
The number two official at the US Fed, Yellen, said overnight that due to high unemployment facing the economy, the Fed has left the door open to further Fed action including QE.
Further QE and the continuation of ultra loose monetary policies will be positive for gold.
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The history of petrodollar recycling…
According to research outlined in Dr. David Spiro’s book, The Hidden Hand of American Hegemony (1999), it was during this time OPEC began discussions on the viability of pricing oil trades in several currencies. This unpublished proposal involved a “basket of currencies” from the Group of Ten nations, or “G-10.” These 10 members of the Bank of International Settlements (plus Austria and Switzerland) included the major European countries and their currencies such as Germany (Mark), France (Franc), and the U.K. (Sterling), as well other industrialized nations such as Japan (yen), Canada (Canadian dollar), and of course the Unites States (U.S. dollar). 35 It should be noted the powerful G-10/BIS Group of Ten also has one unofficial member, the governor of the Saudi Arabian Monetary Authority, or SAMA.
In order to prevent this monetary transition to a basket of currencies, the Nixon administration began high-level talks with Saudi Arabia to unilaterally price international oil sales in dollars only – despite U.S. assurances to its European and Japanese allies that such a unique monetary/geopolitical arrangement would not transpire. In 1974 an agreement was reached with New York and London banking interests which established what became known as “petrodollar recycling.”
That year the Saudi government secretly purchased $2.5 billion in U.S. Treasury bills with their oil surplus funds, and a few years later Treasury Secretary Michael Blumenthal cut a secret deal with the Saudis to ensure that OPEC would continue to price oil in dollars only. 36
In typical understatement Dr. Spiro noted, “…clearly something more than the laws of supply and demand…resulted in 70 percent of all Saudi assets in the United States being held in a New York Fed account.” 37 Naturally, this arrangement with the Saudi government prevented a market-based adjustment, and was the basis for the second phase of the American Century, the Petrodollar phase. What follows is the extraordinary history in which petrodollar recycling was vigorously implemented during the 1970s.
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Caught Between MF Global And The Tax Man
There is still significant money missing from MF Global customers’ futures accounts. The bankruptcy trustee sent MF Global customers 2011 Form 1099-Bs showing their realized and unrealized trading gains and losses from Section 1256 contracts. (Note: The cost-basis reporting crisis does not extend to futures. Taxpayers and tax preparers can rely on Form 1099-Bs for futures, whereas they cannot for securities 1099-Bs.)
MF Global’s bankruptcy trustee James W. Giddens added this note to the Form 1099-Bs: “Although you may not have recovered the entire value of your MFGI account in the SIPA Proceeding (bankruptcy process), your Form 1099 reflects all transactions credited to your MFGI account during 2011. You should consult your tax advisor to determine whether you may claim a deduction or loss for income tax purposes as a result of your not having recovered the full amount of your account.”
Giddens doesn’t say which year the loss may be taken. It’s the consensus of our CPAs and tax attorneys — and the consensus of others we have seen on the Internet — that a MF Global deposit loss recognition event most likely occurs after 2011.
Tax law for writing off deposit losses
The loss is not determined and the trustee still hopes to recover the entire amount (or much more) of missing customer monies. Certainly, they should, as these monies were taken inappropriately and as I pointed out in my Dec. 9 Forbes blog “How To Pay Back MF Global Customers 100%,” why can’t those last-minute transactions to pay counterparties with customer funds be reversed, and the monies recovered? I still believe that not doing this recovery is illegal and wrong. But, this has no effect on my discusson of tax posture.
Tax law for deposit impairment, casualty or theft loss or capital losses all require a known loss and a realization event of that loss. Missing MF Global monies are being recovered slowly and some hold out hope for full or significant recovery. Although the bankruptcy and liquidation happened Oct. 31, 2011 and some courts ruled in early December 2011 on certain matters, the missing money file remains open and that is telling for tax purposes.
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Gold’s Critical Metric
Gold’s Critical Metric
There are many reasons why gold is still our favorite investment – from inflation fears and sovereign debt concerns to deeper, systemic economic problems. But let’s be honest: It’s been rising for over 11 years now, and only the imprudent would fail to think about when the run might end.
Is it time to start eyeing the exit? In a word, no. Here’s why.
There’s one indicator that clearly signals we’re still in the bull market – and further, that we can expect prices to continue to rise. That indicator is negative real interest rates.
The real interest rate is simply the nominal rate minus inflation. For example, if you earn 4% on an interest-bearing investment and inflation is 2%, your real return is +2%. Conversely, if your investment earns 1% but inflation is 3%, your real rate is -2%.
This calculation is the same regardless of how high either rate may be: a 15% interest rate and 13% inflation still nets you 2%. This is why high interest rates are not necessarily negative for gold; it’s the real rate that impacts what gold will ultimately do.
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A Major AFRICOM & US State Department Campaign to Undermine Chinese Influence in Central Africa
According to their website, the American NGO, Invisible Children, claims now to have had over 80 million viewers to their YouTube video, “Kony2012,” since its release on YouTube a few weeks ago. For anyone with the patience to sit through the entire YouTube of Kony2012, it is questionable how truthful the figure of 80 million viewers is. Eighty million is unprecedented in YouTube history by all accounts.
The video features such prominent Hollywood personalities as Angelina Jolie, George Clooney, Lady GaGa, Bill Gates, Bill Clinton, Sean “Puff Daddy” Combs and other notables. It’s a slick, sentimental story directed by Jason Russell, a 33-year-old now-hospitalized American filmmaker who apparently just underwent a bizarre mental disconnect on the streets of San Diego. The YouTube video depicts a young Ugandan, Jacob Acaye, whom Russell claims he befriended some ten years earlier after Acaye escaped conscription into Joseph Kony’s Lord’s Resistance Army (LRA) as an 11-year-old killer. The film portrays Kony as the world’s worst beast and terrorist, in effect, Africa’s Osama bin Laden.
The Invisible Children NGO is itself opaque. It reportedly rakes in millions from sales of such things as buttons, Invisible Children T-shirts, bracelets and posters priced from $30-$250, but it ranks low on transparency regarding other donors. The group, which employs around 100 people, is expected to raise millions of dollars from their “Kony2012” video, but so far it refuses to say how much has been donated or how it will spend the money. The founders of the group, who advocate direct US military intervention in response to the LRA, had been previously criticized for posing with guns alongside members of the Sudan People’s Liberation Army (SPLA) in 2008, an organization widely accused of rape and looting. The group issued a statement in response: “We thought it would be funny to bring back to our friends and family a joke photo. You know, ‘Haha – they have bazookas in their hands but they’re actually fighting for peace’.”
According to the London Guardian, Invisible Children’s “accounts show it is a cash-rich operation, which more than tripled its income in 2011” to nearly $9 million, mainly from personal donations. Of this, nearly 25% was spent on travel and film-making. Most of the money raised has been spent in the US, not for Africa’s “invisible children” or even visible ones. According to information obtained by the Guardian, “the accounts show $1.7million went to US employee salaries, $850,000 in film production costs, $244,000 in ‘professional services’ – thought to be Washington lobbyists – and $1.07 million in travel expenses. Nearly $400,000 was spent on office rent in San Diego” Charity Navigator, a US charity evaluator, gave the organization only two stars for “accountability and transparency.” The USAID, a State Department agency which coordinates its foreign interventions with the Pentagon and CIA, openly states on its website that it has funded Invisible Children Inc. in the past.
